Correlation Between SPDR SP and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both SPDR SP and SPDR Portfolio at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SPDR SP and SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 600 and SPDR Portfolio SP, you can compare the effects of market volatilities on SPDR SP and SPDR Portfolio and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SPDR SP with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and SPDR Portfolio.
Diversification Opportunities for SPDR SP and SPDR Portfolio
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and SPDR is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 600 and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP and SPDR SP is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SPDR SP 600 are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR Portfolio go up and down completely randomly.
Pair Corralation between SPDR SP and SPDR Portfolio
Given the investment horizon of 90 days SPDR SP 600 is expected to generate 1.88 times more return on investment than SPDR Portfolio. However, SPDR SP is 1.88 times more volatile than SPDR Portfolio SP. It trades about 0.14 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about 0.07 per unit of risk. If you would invest 8,595 in SPDR SP 600 on August 23, 2024 and sell it today you would earn a total of 421.00 from holding SPDR SP 600 or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 600 vs. SPDR Portfolio SP
Performance |
| Timeline |
| SPDR SP 600 |
| SPDR Portfolio SP |
SPDR SP and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and SPDR Portfolio
The main advantage of trading using opposite SPDR SP and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, SPDR Portfolio can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SPDR Portfolio will offset losses from the drop in SPDR Portfolio's long position.| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
| SPDR Portfolio vs. iShares ESG Aware | SPDR Portfolio vs. iShares ESG Aware | SPDR Portfolio vs. Vanguard ESG Stock | SPDR Portfolio vs. HUMANA INC |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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